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  5. The Geographic Flow of Bank Funding and Access to Credit: Branch Networks, Synergies, and Local Competition

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

The Geographic Flow of Bank Funding and Access to Credit: Branch Networks, Synergies, and Local Competition

  • Victor Aguirregabiria
  • Robert Clark
  • Hui Wang
American Economic Review (Forthcoming)

Abstract

Geographic dispersion of depositors, borrowers, and banks may prevent funding from flowing to high loan demand areas, limiting credit access. Using bank-county-year level data, we provide evidence of geographic imbalance of deposits and loans and develop a methodology for investigating the contribution to this imbalance of branch networks, market power, and scope economies. Results are based on a novel measure of imbalance and estimation of a structural model of bank competition that admits interconnections across locations and between deposit and loan markets. Counterfactual experiments show branch networks, scope economies, and local competition affect credit flow to disadvantaged markets.

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